A recent article in Fortune magazine discussed the massive loss of market share by Gillette; moving from 71% when it was acquired by Procter and Gamble in 2005 down to its current 59%. It points out that a key reason for this was that Gillette simply missed the growing consumer interest in an adequate performing, and very reasonably priced, razor. Dollar Shave Club, Harry’s and Schick jumped on this trend. Meanwhile, Gillette simply stuck to its decades-old game plan of evermore sophisticated and complex razors at ever-increasing prices.
How did Gillette become so unaware of reality? Basically, it appears that Gillette was its own isolated fiefdom at Procter and Gamble, basking in prior success. They got away with this because competition was historically weak, and Gillette was making good profits, so P&G management left them alone.
Silos and fiefdoms are a topic that I have studied intently over the years and it led to a book I published in 2004 titled The Fiefdom Syndrome. In it I outline three human tendencies that are typically the source of the formation of silos and fiefdoms:
1.) The Urge to Protect the Status Quo – When people are successful, or simply stable for a period of time, they believe they have things figured out and that if they just keep doing what they have been doing, life will be good. They become defensive about any suggestion of change.
2.) The Desire for Independence – Most organizations want to be left alone and want to be totally independent from the rest of the larger organization within which they reside. They are convinced their prior success or stability earns them the right to be left alone.
3.) Inflated Sense of Self-Worth – Over time individuals tend to believe that whatever they are doing, no matter what the results are, things are fine. Any data that conflicts with that notion is rejected or ignored.
Realizing these tendencies, there are a couple of important steps that can be taken to avoid the kinds of silo and fiefdom problems that many organizations experience.
1.) Re-Organize – When the same organizational structure is left in place too long it causes modes of operation to become institutionalized. Occasionally re-organizing to achieve fresh goals can shake the organization out of its complacency.
2.) Replace/Move People Regularly – When a person is in the same job for a long time, typically the innovation stops and the individual becomes protective of the status quo. Getting fresh talent in key jobs is a great way to uncover opportunities to improve.
3.) Checks and Balances – For activities that cut across many organizations in a company, such as information systems, financial issues, manufacturing practices, personnel management, etc., you need a central group that has the authority to reach into any organization involved in these activities and raise issues with the top management.
Net…beware of silos and fiefdoms; it is a natural tendency for humans to form them!